Persona 4: Arena is a direct sequel to the game Persona 4 and takes place 2 months after the true ending of the game. Teddie has disappeared and the Investigation Team find him in the Midnight Channel wearing a Commander's outfit as well as announcing a fighting tournament called the "P-1 Grand Prix" in order to determine who is the "Ultimate Persona User". The team agree to enter the tournament to find out what has happened to Teddie as well as to find out who among them is the "Ultimate Persona User".

In addition to all the playable characters from Persona 4 (seven in total), four characters from Persona 3 are also playable: Aigis, Mitsuru Kirijo, Akihiko Sanada, and Elizabeth. Rise Kujikawa is not playable but will serve as the in-game announcer.

There is also a completely original character made for the game: Labrys as well as her Shadow-self, Shadow Labrys.

There was a balance patch that was released in arcades before the console release. It is impossible to play the previous versions on console; if you play on console, you will be playing on 1.02.

However, there are many videos of 1.00 and 1.01 matches online from Japanese arcades, which might confuse players since they may be using tactics/combos that no longer work in the latest version. To tell the difference, pay attention for the following graphic that shows up at the lower right side of the screen at the start of the match.